Abstract
How does the trading activity on the centralized exchanges (CEXs) and decentralized exchanges (DEXs) change the information transmission patterns between digital and traditional investment assets? Using a quantile connectedness approach, we investigate the relationships between DEX tokens, CEX tokens, and other assets including Gold, Oil, Bitcoin, REIT, Equity, Bonds, and US dollar index. Our findings indicate that at the extreme lowest quantile, the DEX and CEX tokens are the primary recipients of spillovers, whereas other assets are the main transmitters. However, at the extreme upper quantile, the DEX and CEX tokens are the primary transmitters of spillovers to other assets. Our findings have important implications for financial portfolio management ramifications since they demonstrate that during a short squeeze period, DEX–CEX tokens have contagious effects on other assets, reducing the efficacy of risk management and portfolio strategies. Additionally, our findings indicate that DEX–CEX tokens are the best option for hedging oil while being the least expensive alternative for hedging Gold and the USD Index.